The Big Picture: Aereo Held to Violate Public Performance Right

06.25.14

By
Jim Rosenfeld, Lance Koonce, and Eric Feder

In a 6-3 decision written by Justice Breyer, the Supreme Court today ruled that Aereo’s internet television service infringes broadcasters’ exclusive rights to publicly perform their works. Despite the potentially broad ramifications of this closely-watched case, the Court was careful to limit its decision, relying primarily on what it saw as Congress’ decades-old intent to require retransmissions of copyrighted television content to be subject to the Copyright Act. The narrowness of the decision likely comes as welcome news to cloud services providers and others concerned that the Court’s decision could have devastating effects on emerging industries involved in the delivery of online content. At the same time, the majority’s reliance on the commercial characteristics and user experience of Aereo’s service could subtly alter the way in which copyright cases involving new technologies are argued and decided in the future.

BackgroundAereo is an internet-based service that allows its subscribers to watch broadcast television programs over the Internet in exchange for a monthly fee. Aereo’s subscribers can also record and store programs for delayed playback. Aereo does not obtain licenses from copyright holders to record or transmit their programs.

Aereo transmits broadcast programs by capturing the broadcast signal with a different aerial antenna temporarily assigned to each subscriber for that session. (Aereo’s facility contains boards with thousands of tiny antennas—each roughly the size of a dime—so that each subscriber using the service at any one time has access to a single antenna.)

Television broadcasters (and other copyright owners of broadcast television programs) brought a copyright infringement lawsuit against Aereo, Inc. (Aereo) in the District Court for the Southern District of New York. At issue in the case was whether Aereo’s service infringed the copyright holders’ exclusive rights to publicly perform their works. See 17 U.S.C. § 106(4).

The Copyright Act defines “perform” as “to recite, render, play, dance, or act it, either directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible.” 17 U.S.C. § 101. Performing a work “publicly” means:

To perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or

To transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times. (emphasis added)

The broadcaster plaintiffs asserted that Aereo infringed their public performance and reproduction rights under the Copyright Act, and sought a preliminary injunction barring Aereo from transmitting television programs while they were being broadcast. The district court denied the preliminary injunction motion, and the 2nd Circuit affirmed.

The lower court decisions were based on the premise that because each subscriber has access to a single copy of a broadcast through the single antenna used to receive the broadcast, and no other subscribers can receive a transmission from that copy, the transmission did not constitute a “public” performance. In the wake of the litigation in the 2nd Circuit, Aereo began to expand its service to other regions of the country, and several other lawsuits involving Aereo or similar services were initiated. In the ensuing months, a District Court in Massachusetts denied a preliminary injunction against Aereo in accordance with the 2nd Circuit’s decision, while District Courts in Utah and the District of Columbia shut down Aereo in those regions, and a California District Court shut down a similar competing service.

The Majority Decision The Supreme Court reversed the 2nd Circuit and ruled that Aereo’s system publicly performs broadcasters’ copyrighted programs. The Court’s opinion, authored by Justice Breyer and joined by five other justices, was careful to address Aereo’s technology narrowly—explicitly not ruling on the legality of cloud-based storage and other emerging technologies and suggesting that many such technologies were not publicly performing copyrighted works and therefore would not be rendered illegal by its opinion.

The Court divided the public performance analysis into two prongs. First, it ruled that Aereo “performed” programs transmitted through its system. Acknowledging that the Copyright Act’s definitions of “perform” and “transmit” were vague, it looked to the legislative history: Congress had amended the Act in 1976 to overturn two prior Supreme Court rulings which had ruled community antenna television (CATV) systems to be beyond the Act’s scope because the systems did not perform the works they transmitted; under the Court’s analysis, the CATV providers were more like viewers than broadcasters. See Fortnightly Corp. v. United Artists Television, Inc., 392 U. S. 390 (1968); Teleprompter Corp. v. Columbia Broadcasting System, Inc., 415 U. S. 394 (1974). The 1976 Amendment rejected this distinction, defining “perform” as “show[ing a work’s] images in any sequence or [making] the sounds accompanying it audible” and making other amendments which rendered the tramsitter of a program a “performer” of that work. The majority opinion found Aereo substantially similar to the CATV companies that Congress had amended the Act to reach; under the revised Act, Aereo was communicating the programs’ images and sounds, and thus performing those works.

Second, the Court concluded that Aereo’s performance of televised works was “public”. Whether the “performance” in question is the underlying broadcasts (as the broadcasters urged) or the act of transmitting the work (as Aereo argued)—an issue which the Court did not decide—Aereo’s transmission of the performance was public. The Court rejected Aereo’s attempt to get around this conclusion by transmitting each performance from a different antenna, characterizing these technical details as “behind-the-scenes” and irrelevant to a viewer. It pointed to the text of the transmit clause, which states that a performance can be transmitted through a set of “multiple, discrete transmissions” to different viewers at different times. And, significantly, it suggested that transmitting performances to subscribers as “owners or possessors of the underlying works” would require a different analysis, leaving breathing room for cloud storage and various other on-line services.

The Court closed by acknowledging that Congress “did not intend to discourage or to control the emergence or use of different kinds of technologies,” assuring that the “limited” holding in this case would not have that effect and giving some clues as to potential exceptions. Other technologies may or may not constitute “performances” or be “public,” the Court explained. For instance, “[w]e have said that [the term ‘the public’] does not extend to those who act as owners or possessors of the relevant product. And we have not considered whether the public performance right is infringed when the user of a service pays primarily for something other than the transmission of copyrighted works, such as the remote storage of content.” The Court further acknowledged that the fair use doctrine would also provide a defense to infringement for some technologies, as in the recent Google Books decision. The majority put off such questions until they concretely arise in later cases, and noted that interested entities “are of course free to seek action from Congress.”

The DissentJustice Scalia, joined by Justices Thomas and Alito, sharply dissented. In the dissent’s view, Aereo cannot be directly liable for publicly performing the broadcasters’ works because Aereo passively allows its subscribers to select the broadcast content. (The dissent likens Aereo to “a copy shop that provides its patrons with a library card.”) Without any “volitional act” on the part of Aereo, it cannot be liable for direct infringement.

The dissent expressly leaves open the possibility that Aereo may be held secondarily liable (as either a vicarious or contributory infringer) for the direct infringements of its subscribers. In fact, Justice Scalia states that he “share[s] the Court’s evident feeling that what Aereo is doing (or enabling to be done) to the Networks’ copyrighted programming ought not to be allowed,” but “[i]t is not the role of this Court to identify and plug loopholes.”

The dissent criticizes the majority’s decision as being based on the flimsy premise that Congress had previously amended the Copyright Act to cover cable systems and “Aereo looks a lot like a cable system,” therefore it should be treated the same. Ultimately, the dissent warns that, in light of the “imprecision of [the majority’s] result-driven rule,” the Court “cannot deliver on [the] promise” that its decision will not affect cloud-storage providers and cable-television systems.

AnalysisAt oral argument in this case, the very first question asked by the justices was delivered by Justice Sotomayor: Why isn’t Aereo a cable company?

Several months later, the majority has answered that question; Aereo’s system, according to the Court, is sufficiently analogous to the cable services Congress intended to reach when it overturned Fortnightly and Teleprompter, and thus are subject to the proscriptions of the Copyright Act. Without question, the Court’s decision is a major victory for television content providers, because it indicates that any subscription service that facilitates the rerouting of over-the-air broadcasting to end users will likely be viewed as akin to a cable system and be held unlawful, unless the service acquires the necessary rights, such as through private or compulsory licensing.

The Court’s heavy reliance on the legislative history of the 1976 amendments to the Copyright Act, and specifically Congress’ broad purposes in enacting those amendments in response to Fortnightly and Teleprompter, is perhaps unsurprising, as it allowed the Court to attempt to limit its decision to the television industry. The majority takes great pains to confirm that its holding is a narrow one, and not intended to reach new technologies offered by companies that are not “equivalents” of cable companies. In particular, the Court is careful to distinguish services that deliver content to a user that the user already owns or possesses, such as cloud lockers. This should provide comfort to providers of cloud services and other remote storage solutions, including remote DVR applications such as the one approved by the 2nd Circuit in Cartoon Network, LP v. CSC Holdings, Inc., 536 F.3d 121 (2d Cir. 2008), the very case that propelled the 2nd Circuit to decide in Aereo’s favor below.

Perhaps as a consequence of its reliance on legislative intent, the majority’s analysis of how the actual functionality of the Aereo system fits within the framework of the Copyright Act is more perfunctory than might have been expected. In addressing one of the key differences urged by Aereo—that its system does not activate the stream until an end user turns it on and causes a transmission of a performance—the Court says that “[t]his difference means nothing to the subscriber. It means nothing to the broadcaster. We do not see how this single difference, invisible to the subscriber and broadcaster alike, could transform a system that is for all practical purposes a traditional cable system into a ‘copy shop that provides its patrons with a library card.” Similarly, in addressing whether performances using Aereo are public notwithstanding that each transmission is only to one subscriber, the Court asks why the “behind-the-scenes” functionality matters, given that they “do not render Aereo’s commercial objectives” different from the cable providers addressed by the changes to the Act in 1976, and that they do not alter the viewing experience for end users.

As noted, the dissent, authored by Justice Scalia, takes issue with what it terms an “improvised”, “looks-like-cable-TV” standard, versus a more detailed comparison of the technical functionality of the service with the cable systems at issue in the Fortnightly and Teleprompter cases. There is often a tension in copyright law between a high-level, practical view and a granular, technical view. (For instance, in determining infringement courts may examine both a work’s “total concept and feel” and also dissect the work into its component parts under the so-called “abstraction-filtration-comparison” test.) This tension is especially acute in cases involving the intersection of copyright law and new technologies; however, courts have more often tended to examine “under the hood” functionality of such technology to understand how the parties involved may or may not be exploiting one of the exclusive copyright interests reserved to the copyright owner. In cases such as Perfect 10, Inc. v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007), for instance, which examined Google’s image search service, courts eschewed examination of the end-user experience and focused on which computer servers were actually hosting and delivering the content.

By potentially elevating an analysis of high-level functionality and viewer experience under the performance right, the Court may have opened the door for arguments in future cases that are less dependent on the precise functionality of underlying technologies, and more on the intent of the parties or the overall practical effect of the technology. This may make it difficult for technology companies to predict whether their new technologies are infringing.

Disclaimer

This advisory is a publication of Davis Wright Tremaine LLP. Our purpose in publishing this advisory is to inform our clients and friends of recent legal developments. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.